Buy Scotts Miracle-Gro on likely favorable marijuana referendum votes, JPMorgan says

Marijuana plants at a grow facility in Denver.
Matthew Staver | Bloomberg | Getty Images

JPMorgan reiterated its overweight rating and raised its price target on Scotts Miracle-Gro as the company's hydroponics business will continue to add stock market value in the future even after a big rally this year, the firm says.

The bank turned heads in August when it upgraded the fertilizer maker because of its small, but growing hydroponics business. Hydroponics is the process of growing plants in liquids without the use of soil and is a popular method for cultivating marijuana.

At the time, it was the largest company to be called a pot play by a major Wall Street bank. Scotts' shares are up 12 percent since that upgrade and have risen 35 percent year to date as of Friday's close.

"Various states with large populations are voting on marijuana legislation on Tuesday, Nov. 8, including California for recreational use and Florida for medical use. Polls point to favorable votes both in California and Florida," analyst Jeffrey Zekauskas wrote in a note to clients Monday.

"It may be the case that there is shorter-term negative volatility in the Scotts share price over the next days as some investors will believe that a favorable outcome is reflected in the Scotts share price. That price volatility may turn positive afterward as the market rethinks the implications of a favorable vote."

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